Dow Jones futures trading higher after Fed vows to support US economy

Dow Jones futures have climbed 3% ahead of market open on Monday, suggesting that US equities will trade higher, with investors hopeful that Apple, Facebook and Google will see gains as the three stocks near buy points.

The ongoing uncertainty caused by the coronavirus crisis is still applying significant pressure on equities, with US stocks seeing their recent rally end last week, though manging to rebound from key levels, helping key benchmarks finish on stable footing.

Looking ahead, US futures markets point towards some sharp gains on Monday, with investors likely emboldened by comments from Federal Reserve Chairman Jerome Powell, who hinted that the central bank would take further action to breathe life into the US economy.

‘The data we'll see for this quarter, which ends in June, will be very, very bad,’ Powell said in an interview with CBS News. ‘There'll be a, you know, big decline in economic activity, big increase in unemployment.’

‘The good news is that we have the tools to limit that longer-run damage by continuing to provide support to households and businesses as we get through this,’ he added.

The Dow Jones closed at 23,685.42 on Friday last week.

US factory output hits 23-year low amid Covid-19

US stocks rebounded on Friday despite sustaining losses over the course of last week, but equities remained relatively resilient considering that investors were met with bleak industrial production data.

‘Manufacturing output has fallen to the levels last seen in 1997. Excess supply will undoubtedly hurt capital expenditure in coming quarters with more significant job losses expected,’ James Knightley, chief international economist at ING said.

‘We are hoping that May should post a better manufacturing outcome with a number of production facilities restarting, but it is likely to be slow,’ he added.

US factory output fell 11.2% in April – the largest monthly fall since records began.

S&P 500 edges higher again

This S&P 500 has been in a range for a month, bouncing from 2800 towards 3000 before dropping back again, according to Chris Beauchamp, chief market analyst at IG.

‘The losses earlier last week and then the recovery in the second half leave this view intact. Above 3000 the index finally clears the March gap down, targeting 3130,’ he added. ‘Alternatively, losses below 2800 open the path to 2730 and then 2600.’

How to trade indices with IG

Looking to trade the Dow Jones and other major indices? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

1. Create an IG trading account or log in to your existing account
2. Enter ‘Dow Jones’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade